9911796707
TMI Blog1995 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 28, 1972. According to him, it constituted a source of income assessable under the head "Other sources" and pertained to the previous year ended March 31, 1972, since, according to him, the winnings from races became assessable to tax for the first time only in the assessment year 1973-74, the assessee was not liable to tax on the above amount. The assessee maintained a cash book and ledger for the period from July 1, 1971, to June 30, 1972, and the race account in the ledger showed the cash investment of Rs. 4,302 and the jackpot winnings. The race account surplus of Rs. 38,063 was shown as a credit in the assessee's capital account on March 12, 1972. The Income-tax Officer accepted the case of the assessee and assessed him accordingly on the net income Of Rs. 1,600 only. The Commissioner, however, exercised his revisional power and took the view that the previous year would be the year ended on June 30, 1972, and, therefore, the race winnings would be taxable. The assessee appealed. The Tribunal after hearing the parties, held as under : " 'Previous year' is defined in section 3 of the Income-tax Act, 1961. Under section 3(1)(a), the normal previous year has to be the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner under section 263 is accordingly vacated. It is almost preliminary, but before we proceed further in this case, we may remind ourselves that the income-tax is charged in respect of the total income of the previous year or previous years, as the case may be, of every person at any rate or rates for any assessment year in accordance with the Central Act in that particular assessment year. "Previous year" is defined under section 3 of the Act to mean,-- (a) the financial year immediately preceding the assessment year or (b) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date ; or (c) in the case of any person or business or class of persons or business not falling within clause (a) or clause (b), such period as may be determined by the Board or by any authority authorised by the Board in this behalf ; or (d) in the case of a business or profession newly set up in the said financial year, the period beginning with the date of the setting up of the business or profession, and-- (i) ending with the said financial year, or (ii) if the accounts of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year provided that on application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provision of sub-section (8) of section 139 of the Act. The Finance Act 16 of 1972 prescribed under section 2(l) thereof subject to the provision of sub-sections (2) and (3), for the assessment year commencing on the first day of April, 1972, that income-tax would be charged at the rates specified in Part I of the First Schedule. Chapter III of the said Act introduced in section 2 of the Income-tax Act with effect from the first day of April, 1972, contains items of property including the additional sub-clause (ix) in clause (24) in these words : "(ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever ;" There is no dispute as to the facts : (i) the assessee had chosen his own accounting year and closed his accounts for 1971-72 on June 30, 1972, which ended on a date within the financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 38,079 as income. On the other hand, the Tribunal has referred to the fact that there is a statement accompanying the return which indicated : 'Horse race receipts Rs. 38,079 (exempt)'. The learned counsel for the Revenue has, however, argued that the statement made by the Tribunal in paragraph 3 of its order that the return clearly indicated that the receipt of Rs. 38,079 was exempt, the receipt being relevant for the assessment year 1972-73, should not be accepted by us as correct because, according to learned counsel, the statement, the contents of which are reproduced by the Tribunal, itself merely states 'Horse race receipts Rs. 38,079 (exempt)'. It is not possible for us to reject the observations made by the Tribunal as incorrect because there is no material to show that the statement is really incorrect. The statement referred to by the Tribunal in paragraph 4 is clearly in addition to the statement made in the return that the receipt of Rs. 38,079 was exempt. The order of the Income-tax Officer also shows that a positive case was put before him that there is no regular account for this income and hence, the receipt being in March, 1972, before the financial year 1972-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that inasmuch as no separate account for the share of the company was maintained by the assessee in his books of account and, since that amount was not made up for the purpose of capital gains, which arose out of the sale of shares of the company, the financial year should be taken as the previous year. The assessee's further contention was that the books of account-were for all sources of income other than the source 'capital gains' and., therefore, the previous year for the purposes of capital gains should be the financial year 1960-61 and for the rest of the amounts shown in the return, the previous year should be the calendar year 1961. It was held that by filing the return which was filed as on the footing of the balance-sheet as on December 31, 1961, the assessee had exercised the option mentioned in section 3(1)(b) and once that option was exercised, the previous year for the purpose of capital gains must also be held to be the calendar year 1961 and not the financial year 1960-61. It is difficult to see how this case can be of any assistance to us. All that this case decided was that the transaction: out of which the capital gains arose, had taken place on January 1, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court was that the assessee had disclosed the capital gains in the return for the assessment year 1969-70.... The decision is, therefore, clearly distinguishable on facts. On a careful consideration of the matter, we are satisfied that the Tribunal was justified in taking the view that the sum of Rs. 38,079 being the income from horse races was not taxable for the assessment year 1973-74. The question referred to us has to be answered in the affirmative and against the Revenue. The question is accordingly answered." This court in Kothari's case [1986] 160 ITR 27, has also observed about the effect of section 59 of the Act and stated as follows : " The effect of section 59 of the Finance Act, 1972, is that notwithstanding the amendments to the definition of income in section 2(24) and the amendment to section 56 of the Income-tax Act, 1961, by the Finance Act, 1972, Parliament expressly provided that when the total income of any person is to be computed for the previous year relevant to the assessment year commencing on April 1, 1972, any income falling within section 10(3) as it stood immediately before that date shall not be included. " Two obvious principles thus emerge an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-71. The financial year preceding the same year 1970-71 was the period between April 1, 1969, and March 31, 1970. As has already been noticed, the accounts for a new source of income have been made up by the assessee as on July 31, 1969. That date falls within the financial year preceding the income-tax assessment year 1970-71. Therefore, the previous year for this new source of income for the income-tax assessment is the income-tax assessment year 1970-71 and not the assessment year 1969-70. We agree with the contention put forth by Sri Anjaneyulu on behalf of the assessee, that the provisions of section 3(1)(b) of the Income-tax Act are applicable to the facts of the assessee's case inasmuch as the accounts maintained by the assessee were made up to a date falling beyond the financial year preceding the assessment year 1969-70." In Guntur Merchants Cotton Press Co. Ltd. v. CIT [1989] 175 ITR 313 (AP), the principle is explained as follows : " The above provisions, when read together, disclose that ordinarily speaking the financial year would be the previous year. But it is open to the assessee to opt for any other previous year so long as the accounts of that previous year a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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